How To Solve The Foreclosure Crisis

1046 words - 4 pages

Foreclosures are a major problem in the world and especially in this
country right now. There is not a way to stop them entirely and would
probably be more harmful if they we tried. That said, the amounts of
foreclosures happening right now are not helpful for the economy and
for the people who live in it. I will be discussing a few ideas on
what we can do now to improve the situation.
First we need to consider the source of the problem. When you boil it
all down there were people getting mortgages that were not suitable for
them. Some of it comes down to fraud, for others it is the lack of
experience and responsibility on the part of the mortgage brokers, and
for others it was the streamlining of mortgage underwriting that
stopped looking at the persons applying for the loan and only looking
at the Credit report. All of these are symptoms of one primary issue:
The lack of self regulation.
Now many will either be too excited or too scared by that comment, but
I am not advocating the creation of a new government organization that
will promise to police everyone, nor am do I think that mortgage
brokers should continue to self regulate without being able to answer
to some outside source that has some power over them. What I am
referring to is a model that has already been implemented and is for
the most part very successful. This model is that of securities
brokerages and the SEC.
Many will immediately dismiss this model talking about all the money
people lost in Enron stock or they will talk about ponzi schemes like
that of Bernie Maddoff. First of all regulation does not guarantee
that you can’t make bad decisions with your money. Those who lost
money in Enron, bought and held the stock usually because of their own
decision and not because a broker sold it to them. As for Bernie
Maddoff, He controlled a hedge fund. Hedge funds can’t be purchased by
the everyday investor and so its regulation would not have affected 90
percent of the individual investors (it does still affect people
indirectly through things such as pension plans which is why it should
be regulated better than it is now).
What is this model? Once again it is a model of Self regulation. Many
people look at the SEC as a giant police department of the securities
industry, which in a way they are, but they do not work like one would
think. They are not out patrolling the streets of Wall Street and
catching people in the act of deception. Every brokerage firm is
considered a Self-Regulating Organization or SRO for short. The SEC
provides general guidelines and the SRO has to create their own rules
for complying with the SRO. E-trade was recently fined millions of
dollars for not having proper Ant-money laundering verifications in
place. They weren’t fined for allowing money laundering nor were they
fined for not following a specific verification procedure. ...

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